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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Product demand - productivity - prices of other resources - and complementary resources






2. The ability to set the price above the perfectly competitive level






3. Es = (%dQs) / (%dPrice)






4. Ed < 1






5. The difference between total revenue and total explicit and implicit costs






6. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






7. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






8. The practice of selling essentially the same good to different groups of consumers at different prices






9. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






10. TR = P * Qd






11. A good for which higher income increases demand






12. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






13. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






14. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






15. The rational decision maker chooses an action if MB = MC






16. When firms focus their resources on production of goods for which they have comparative advantage






17. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






18. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






19. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






20. A firm that has market power in the factor market (a wage-setter)






21. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






22. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






23. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






24. Entry (or exit) of firms does not shift the cost curves of firms in the industry






25. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






26. The total quantity - or total output of a good produced at each quantity of labor employed






27. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






28. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






29. MUx / Px = MUy/Py or MUx/MUy = Px/Py






30. The mechanism for combining production resources - with existing technology - into finished goods and services






31. AFC = TFC/Q






32. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






33. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






34. All firms maximize profit by producing where MR = MC






35. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






36. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






37. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






38. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






39. The difference between total revenue and total explicit costs






40. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






41. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






42. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






43. The sum of consumer surplus and producer surplus






44. The most desirable alternative given up as the result of a decision






45. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






46. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






47. Exists at the point where the quantity supplied equals the quantity demanded






48. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






49. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






50. Ed = 0 - no response to price change